Counsel Canadian Core Fixed Income

Transcription

1 Counsel Canadian Core Fixed Income interim financial statements For the period ended September 30, 2017 Counsel Portfolio Services Inc., the Manager of the Fund, appoints independent auditors to audit the Fund s Annual Financial Statements. Under Canadian securities laws (National Instrument ), if an auditor has not reviewed the Interim Financial Statements, this must be disclosed in an accompanying notice. The Fund s independent auditors have not performed a review of these Interim Financial Statements in accordance with standards established by the Chartered Professional Accountants of Canada.

2 STATEMENTS OF FINANCIAL POSITION at September 30, 2017 (unaudited) with comparative figures at March 31, 2017 (audited) (in $ 000 except per security amounts) Assets Current assets: Sept. 30 Mar Investments at fair value 42,039 32,376 Cash and cash equivalents 789 2,393 Accrued interest receivable Dividends receivable - - Accounts receivable for investments sold 90 1,478 Accounts receivable for securities issued Accounts receivable from the Manager - - Margin with broker Derivative assets Other assets - - Non-current assets: 43,356 36,592 Taxes recoverable - - Other assets Total assets 43,356 36,592 Liabilities Current liabilities: Bank indebtedness - - Accounts payable for investments purchased 555 3,578 Accounts payable for securities redeemed 2 13 Distributions payable - - Accrued expenses and miscellaneous payables - - Dividends payable on investments sold short - - Derivative liabilities 29 1 Taxes payable - - Other liabilities - - Total liabilities 586 3,592 Net assets attributable to securityholders 42,770 33,000 STATEMENTS OF COMPREHENSIVE INCOME for the periods ended September 30 (in $ 000 except per security amounts) Income: Dividends - - Interest and other income Net realized gain (loss) Net unrealized gain (loss) (803) 144 Income (loss) from derivatives (41) - Income (loss) from short selling - - Securities lending income 1 - Trust income - - Total income (272) 438 Expenses: Management fees - - Management fee rebates - - Administration fees - - Commissions and other portfolio transaction costs - - Independent Review Committee costs - - Interest and other charges - - Expenses before amounts absorbed by Manager - - Expenses absorbed by Manager - - Net expenses - - Increase (decrease) in net assets attributable to securityholders from operations before tax (272) 438 Foreign withholding tax expense (recovery) - - Foreign income tax expense (recovery) - - Income tax expense (recovery) - - Increase (decrease) in net assets attributable to securityholders from operations (272) 438 Net assets attributable to securityholders per security per series Sept. 30 Mar. 31 Sept. 30 Mar Series O ,769 32,999 Series R ,770 33,000 Increase (decrease) in net assets attributable to securityholders from operations per security per series Series O (0.05) 0.36 (272) 438 Series R (0.05) (272) 438 The accompanying notes are an integral part of these financial statements.

3 STATEMENTS OF CHANGES IN FINANCIAL POSITION for the periods ended September 30 (in $ 000 except when stated) TOTAL SERIES O SERIES R Net assets attributable to securityholders, beginning of period 33,000 5,034 32,999 5, Increase (decrease) in net assets attributable to securityholders resulting from: Operations (272) 438 (272) Distributions: Income (409) (132) (409) (132) - - Capital gains Return of capital Management fee rebates Total distributions (409) (132) (409) (132) - - Security transactions: Proceeds from sale of securities 12,325 14,298 12,325 14, Proceeds from securities issued on merger Reinvested from distributions Payment on redemption of securities (2,283) (609) (2,283) (609) - - Total security transactions 10,451 13,821 10,451 13, Increase (decrease) in assets attributable to securityholders 9,770 14,127 9,770 14, Net assets attributable to securityholders, end of period 42,770 19,161 42,769 19, Increase (decrease) in securities (in thousands): Securities outstanding, beginning of period 3, Add (deduct): Securities sold 1, , Securities issued on merger Reinvested from distributions Securities redeemed (224.4) (59.6) - - Securities outstanding, end of period 4, , The accompanying notes are an integral part of these financial statements.

4 STATEMENTS OF CASH FLOWS for the periods ended September 30 (in $ 000) Cash flows from operating activities Increase (decrease) in net assets attributable to securityholders from operations (272) 438 Less non-cash impact of: Net realized loss (gain) on investments (108) (150) Change in net unrealized loss (gain) on investments 803 (144) Distributions received from Underlying Funds - - Adjustments for: Proceeds from sale and maturity of investments 27,972 14,280 Purchases of investments (39,948) (27,308) (Increase) decrease in accounts receivable and other assets (58) (49) Increase (decrease) in accounts receivable and other liabilities - - Net cash provided by (used in) operating activities (11,611) (12,933) Cash flows from financing activities: Proceeds from securities issued 12,302 14,551 Proceeds from securities issued on merger - - Payments on redemption of securities (2,294) (609) Distributions paid net of reinvestments - - Net cash provided by (used in) financing activities 10,008 13,942 Increase (decrease) in cash and cash equivalents (1,603) 1,009 Cash and cash equivalents at beginning of period 2, Effect of exchange rate fluctuations on cash and cash equivalents (1) - Cash and cash equivalents, end of period 789 1,209 Cash Cash equivalents Bank indebtedness ,209 Supplementary disclosures on cash flow from operating activities: Dividends received net of withholding taxes - - Interest received net of withholding taxes Interest paid - - Income taxes paid (recovered) - - The accompanying notes are an integral part of these financial statements.

5 SCHEDULE OF INVESTMENTS as at September 30, 2017 Average Fair No. of Units/ Cost Value Country Sector Shares ($ 000) ($ 000) BONDS 407 International Inc. 3.43% MTN Canada Corporate 140, International Inc. 3.60% Callable Canada Corporate 20, AIMCo Realty Investors LP 2.27% Callable 2024 Canada Corporate 70, Algonquin Power & Utilities Corp. 5.50% Callable Canada Corporate 195, Algonquin Power & Utilities Corp. 4.65% Canada Corporate 110, Algonquin Power & Utilities Corp. 4.09% Callable Canada Corporate 60, Alimentation Couche-Tard Inc. 3.06% Callable 2024 Canada Corporate 100, Allied Properties REIT 3.93% Series B Canada Corporate 100, Allied Properties Real Estate Investment Trust 3.64% Callable 2025 Canada Corporate 80, AltaGas Ltd. 3.72% Callable Canada Corporate 140, AltaLink LP 3.72% Callable MTN Canada Corporate 117, Anheuser-Busch InBev Finance Inc. 3.30% Callable 2022 Belgium Corporate USD 120, Anheuser-Busch InBev Finance Inc. 2.60% Callable 2024 Belgium Corporate 90, Anheuser-Busch InBev Finance Inc. 4.32% Callable Series MPLE Belgium Corporate 80, APT Pipelines Ltd. 4.25% Australia Corporate 140, Artis Real Estate Investment Trust 3.75% Canada Corporate 60, AT&T Inc. 3.83% United States Corporate 260, Aviva PLC 4.50% United Kingdom Corporate 100, Bank of America Corp. F/R Callable 2022 United States Corporate 190, Bank of America Corp. F/R Callable 2024 United States Corporate 200, Bank of Montreal 2.27% DPNT Canada Corporate 560, Bank of Montreal 2.70% DPNT Canada Corporate 140, Bank of Montreal 3.32% Canada Corporate 160, Bank of Montreal F/R Callable 2022 Canada Corporate 140, The Bank of Nova Scotia 1.90% DPNT Canada Corporate 150, The Bank of Nova Scotia 1.83% Canada Corporate 480, The Bank of Nova Scotia 2.29% Canada Corporate 150, The Bank of Nova Scotia 3.37% Callable 2020 Canada Corporate 145, The Bank of Nova Scotia 4.50% Canada Corporate USD 40, bcimc Realty Corp. 3.00% Callable 2026 Canada Corporate 130, Bell Canada 2.70% Callable Canada Corporate 200, Bell Canada 3.60% Callable MTN Canada Corporate 90, Bell Canada 4.45% Callable Canada Corporate 120, BMW Canada Inc. 1.88% Germany Corporate 30, Brookfield Renewable Energy Partners ULC 3.75% Callable 2025 Canada Corporate 20, Brookfield Renewable Energy Partners ULC 3.63% Callable 2026 Canada Corporate 230, Bruce Power LP 2.84% Canada Corporate 250, Bruce Power LP 3.00% Callable 2024 Canada Corporate 110, Caisse Centrale Desjardins 2.09% Canada Corporate 615, Canada Housing Trust No. 1 F/R Canada Federal Government 3,760,000 3,768 3,778 Canada Housing Trust No % Canada Federal Government 660, Canada Housing Trust No % Canada Federal Government 190, Canadian Credit Card Trust II 1.83% Canada Corporate 200, Canadian Imperial Bank of Commerce 2.30% DPNT Canada Corporate 600, Canadian Imperial Bank of Commerce F/R 3.00% Callable 2019 Canada Corporate 60, Canadian Imperial Bank of Commerce 3.42% Callable 2021 Canada Corporate 190, Canadian National Railway Co. 3.60% Callable 2047 Canada Corporate 10, Canadian Real Estate Investment Trust 2.95% Callable 2022 Canada Corporate 60, Canadian Western Bank 2.74% DPNT Canada Corporate 40, Capital Power Corp. 4.28% Callable 2024 Canada Corporate 150, Cards II Trust 2.16% Canada Corporate 200, Chartwell Retirement Residences 3.79% Callable 2023 Canada Corporate 70, CHIP Mortgage Trust 2.98% Canada Corporate 20, Choice Properties Real Estate Investment Trust 4.06% Callable Canada Corporate 150, Citigroup Inc. 3.39% United States Corporate 200, CU Inc. 3.76% Callable 2046 Canada Corporate 40, Eagle Credit Card Trust 2.15% Canada Corporate 200, Enbridge Inc. 3.20% Callable 2027 Canada Corporate 50, Enbridge Inc. 4.24% Canada Corporate 70, Enbridge Inc. 4.57% Canada Corporate 160, Enbridge Inc. 5.37% Callable 2027 Canada Corporate 280, EnerCare Solutions Inc. 3.38% Callable 2022 Canada Corporate 70, EnerCare Solutions Inc. 3.99% Callable 2023 Canada Corporate 70, The Fédération des Caisses Desjardins du Québec 2.39% Canada Corporate 150, Fairfax Financial Holdings Ltd. 4.50% Canada Corporate 250, Fairfax Financial Holdings Ltd. 4.70% Callable 2026 Canada Corporate 60, Fortified Trust 1.67% Canada Corporate 240, FortisAlberta Inc. 3.34% Callable MTN Canada Corporate 10, Gaz Metro Inc. 1.52% Canada Corporate 160, General Electric Capital Corp. 4.60% United States Corporate 150, General Motors Financial of Canada Ltd. 2.60% United States Corporate 70, Genesis Trust II 1.70% Canada Corporate 450, Glacier Credit Card Trust 2.05% Canada Corporate 120, The Goldman Sachs Group Inc. 3.55% United States Corporate 200, The Goldman Sachs Group Inc. 2.43% Callable United States Corporate 130, Government of Canada 0.75% Canada Federal Government 180,

6 SCHEDULE OF INVESTMENTS (continued) as at September 30, 2017 Average Fair No. of Units/ Cost Value Country Sector Shares ($ 000) ($ 000) BONDS (continued) Government of Canada 3.25% Canada Federal Government 120, Government of Canada 2.75% Canada Federal Government 70, Government of Canada 1.50% Canada Federal Government 80, Government of Canada 2.50% Canada Federal Government 120, Government of Canada 1.00% Canada Federal Government 140, Government of Canada 1.25% Real Return Canada Federal Government 86, Granite REIT Holdings LP 3.87% Callable 2023 Canada Corporate 160, H&R Real Estate Investment Trust 2.92% Canada Corporate 80, H&R Real Estate Investment Trust 3.37% Callable 2023 Canada Corporate 110, HCN Canadian Holdings-1 LP 3.35% United States Corporate 120, Heathrow Funding Ltd. 3.25% United Kingdom Corporate 200, Hollis Receivables Term Trust II 1.79% Canada Corporate 920, HSBC Bank Canada 2.17% Canada Corporate 630, HSBC Holdings PLC 3.20% United Kingdom Corporate 150, Hydro One Inc. 3.91% Callable 2045 Canada Corporate 165, Hydro One Inc. 3.72% Canada Corporate 30, Inter Pipeline Ltd. 2.73% Callable 2024 Canada Corporate 200, Inter Pipeline Ltd. 3.17% Callable 2024 MTN Canada Corporate 70, Inter Pipeline Ltd. 3.48% Callable 2026 Canada Corporate 150, JPMorgan Chase & Co. 3.19% United States Corporate 130, Laurentian Bank of Canada 3.00% Canada Corporate 120, The Manufacturers Life Insurance Co. 2.39% Callable 2021 Canada Corporate 310, Manulife Bank of Canada 1.92% DPNT Canada Corporate 240, Manulife Bank of Canada 2.08% Canada Corporate 100, Manulife Financial Corp. F/R Callable 2024 Canada Corporate 120, McDonald s Corp. 3.13% Callable 2025 United States Corporate 160, Molson Coors International LP 2.25% United States Corporate 60, Molson Coors International LP 2.84% Callable 2023 United States Corporate 80, Morgan Stanley 3.00% Series MPLE United States Corporate 200, National Bank of Canada 1.96% Canada Corporate 690, Nissan Canada Financial Services Inc. 1.75% Canada Corporate 40, North West Redwater Partnership 2.80% Callable 2027 Canada Corporate 200, North West Redwater Partnership 3.65% Callable 2034 Canada Corporate 150, Nykredit Realkredit AS 1.00% Denmark Corporate DKK 850, OMERS Realty Corp. 3.33% Canada Corporate 190, OMERS Realty Corp. 3.24% Callable 2027 Canada Corporate 160, Ontario Electricity Financial Corp. 0% Canada Provincial Governments 40, Ontario Power Generation Inc. 3.32% Callable 2027 Canada Corporate 90, OPB Finance Trust 2.98% Canada Provincial Governments 60, Pembina Pipeline Corp. 2.99% Callable 2023 Canada Corporate 116, Pembina Pipeline Corp. 3.71% Callable 2026 Canada Corporate 90, PepsiCo Inc. 2.15% Callable 2024 United States Corporate 50, Province of Manitoba 2.85% Canada Provincial Governments 290, Province of Manitoba 3.40% Canada Provincial Governments 340, Province of Ontario 3.15% Canada Provincial Governments 520, Province of Ontario 2.40% Canada Provincial Governments 2,830,000 2,801 2,761 Province of Ontario 2.60% Canada Provincial Governments 2,970,000 2,980 2,924 Province of Ontario 2.90% Canada Provincial Governments 980, Province of Ontario 2.80% Canada Provincial Governments 1,975,000 1,847 1,797 Province of Quebec 2.50% Canada Provincial Governments 1,070,000 1,055 1,052 Province of Quebec 2.75% Canada Provincial Governments 1,490,000 1,515 1,486 Province of Quebec 3.50% Canada Provincial Governments 50, Province of Quebec 3.50% Canada Provincial Governments 430, Royal Bank of Canada 2.00% Canada Corporate 460, Royal Bank of Canada 2.33% DPNT Canada Corporate 220, Royal Bank of Canada 3.31% Canada Corporate 220, Royal Bank of Canada 4.65% Canada Corporate USD 200, Saputo Inc. 1.94% Callable 2022 Canada Corporate 50, Saputo Inc. 2.83% Callable 2023 Canada Corporate 20, Sun Life Financial Inc. F/R Callable 2020 Canada Corporate 120, Sun Life Financial Inc. F/R Callable 2021 Canada Corporate 125, Sun Life Financial Inc. F/R Callable 2023 Canada Corporate 200, Sydney Airport Finance Co. Pty. Ltd. 3.63% Callable 2026 Australia Corporate USD 140, TELUS Corp. 4.70% Callable 2047 Canada Corporate 90, Thomson Reuters Corp. 3.31% Callable Canada Corporate 190, TMX Group Ltd. 4.46% Callable 2023 Canada Corporate 80, The Toronto-Dominion Bank 1.91% DPNT Canada Corporate 740, The Toronto-Dominion Bank F/R Callable 2024 Canada Corporate 250, The Toronto-Dominion Bank 4.86% Callable 2026 Canada Corporate 160, TransCanada Pipelines Ltd. 3.39% Callable 2027 Canada Corporate 110, TransCanada Trust F/R Callable 2027 Canada Corporate 110, Transurban Finance Co. Pty Ltd. 3.37% Australia Corporate 350, United States Treasury 0.89% United States Foreign Governments USD 670, United States Treasury 3.00% United States Foreign Governments USD 770,000 1, Ventas Canada Finance Ltd. 2.55% Callable 2023 United States Corporate 90, Verizon Communications Inc. 2.63% Callable 2026 United States Corporate USD 160,

7 SCHEDULE OF INVESTMENTS (continued) as at September 30, 2017 Average Fair No. of Units/ Cost Value Country Sector Shares ($ 000) ($ 000) BONDS (continued) VW Credit Canada Inc. 2.45% Germany Corporate 100, Wells Fargo & Co. 2.22% United States Corporate 110, Wells Fargo & Co. 3.87% MTN United States Corporate 100, Wells Fargo & Co. 2.98% Series MPLE United States Corporate 100, Westcoast Energy Inc. 4.79% Canada Corporate 40, TOTAL INVESTMENTS 42,718 42,039 Net Assets Total investments 42,039 Cash and cash equivalents 789 Derivative assets (see schedule of derivative instruments) 22 Derivative liabilities (see schedule of derivative instruments) (29) Other net assets (liabilities) (51) 42,770 Schedule of Asset Composition The effective allocation shows the regional or sector exposure of the Fund calculated by including the Fund s proportionate share of its holdings in index participation units and derivatives. at September 30, 2017 BY ASSET TYPE % of net assets Corporate Bonds 51.7 Provincial Bonds 29.6 Federal Bonds 12.7 Foreign Government Bonds 4.3 Cash and cash equivalents 1.8 Other (0.1) Total EFFECTIVE REGIONAL ALLOCATION Canada 83.2 United States 10.8 Pacific ex Japan 1.6 Europe ex U.K. 1.5 United Kingdom 1.1 Cash and cash equivalents at March 31, 2017 BY ASSET TYPE % of net assets Corporate Bonds 47.7 Provincial Bonds 34.9 Federal Bonds 3.7 Foreign Government Bonds 2.6 Mortgage Backed 2.2 Cash and cash equivalents 7.2 Other 1.7 Total EFFECTIVE REGIONAL ALLOCATION Canada 85.4 United States 2.6 United Kingdom 1.7 Pacific ex Japan 1.5 Europe ex U.K. 1.0 Japan 0.6 Cash and cash equivalents Schedule of Derivative Instruments as at September 30, 2017 Schedule of Forward Currency Contracts Currency to Contract Currency to Current Unrealized Unrealized Counterparty Settlement be received costs be delivered fair value gains losses credit rating date (000) (CAD$ 000) (000) (CAD$ 000) (CAD$ 000) (CAD$ 000) AA CAD DKK AA CAD USD AA ,431 CAD 1,431 1,160 USD 1,447 - (16) AA CAD USD (13) 9 (29) Schedule of Futures Contracts Notional Unrealized Unrealized Type of No. of Expiration Average rate value gains losses contract contracts date of contracts (CAD$ 000) (CAD$ 000) (CAD$ 000) CME Ultra Long Term U.S. Treasury Bond Future (2) December USD (412) 6 - Montreal Exchange 10 Year Canadian Bond Future (7) December CAD (947) TOTAL DERIVATIVE ASSETS 22 TOTAL DERIVATIVE LIABILITIES (29)

8 NOTES TO INTERIM FINANCIAL STATEMENTS 1. FISCAL PERIODS AND GENERAL INFORMATION The information provided in these financial statements and notes thereto is for the six-month periods ended or as at September 30, 2017 and 2016 (as applicable), except for the comparative information presented in the Statements of Financial Position and notes thereto, which is as at March 31, In the year a series is established, period represents the period from inception to the period end of that fiscal period. Refer to Note 10 for series inception dates. The Fund is organized as an open-ended unit trust established under the laws of the Province of Ontario pursuant to a Declaration of Trust as amended and restated from time to time. The address of the Fund s registered office is 5015 Spectrum Way, Suite 300, Mississauga, Canada. The Fund is authorized to issue an unlimited number of units (referred to as security or securities ) of multiple series. Series of the Fund are available for sale under Simplified Prospectus and/or exempt distribution options. Counsel Portfolio Services Inc. (the Manager or Counsel ) acts as the Fund s manager and trustee. 2. BASIS OF PREPARATION AND PRESENTATION These unaudited interim financial statements ( financial statements ) have been prepared in accordance with International Financial Reporting Standards ( IFRS ), including International Accounting Standard 34 Interim Financial Reporting, as issued by the International Accounting Standards Board ( IASB ).These financial statements were prepared using the same accounting policies, critical accounting judgments and estimates as applied in the Fund s most recent audited annual financial statements for the year ended March 31, A summary of the Fund s significant accounting policies under IFRS is presented in Note 3. These financial statements are presented in Canadian dollars, which is the Fund s functional currency, and rounded to the nearest thousand unless otherwise indicated. These financial statements are prepared on a going concern basis using the historical cost basis, except for financial assets and liabilities that have been measured at fair value. These financial statements were authorized for issue by Counsel s Board of Directors on November 14, SIGNIFICANT ACCOUNTING POLICIES (a) Financial Instruments Financial instruments include financial assets and liabilities such as debt and equity securities and derivatives. The Fund classifies and measures financial instruments In accordance with IFRS 9 Financial Instruments (as issued in 2014) ( IFRS 9 ). Upon initial recognition, financial instruments are classified as fair value through profit or loss ( FVTPL ). All financial instruments are recognized in the Statements of Financial Position when the Fund becomes a party to the contractual requirements of the instrument. Financial instruments are derecognized when the right to receive cash flows from the instrument has expired or the Fund has transferred substantially all risks and rewards of ownership. As such, investment purchase and sale transactions are recorded as of the trade date. Investments are designated on initial recognition as FVTPL with changes in fair value recognized in the Statement of Comprehensive Income Net unrealized gain (loss). The Fund s redeemable securities contain multiple contractual obligations and therefore meet the criteria for classification as financial liabilities. The Fund s obligation for net assets attributable to securityholders is presented at the redemption amount. Realized and unrealized gains and losses on investments are calculated based on average cost of investments and exclude commissions and other portfolio transaction costs, which are separately reported in the Statement of Comprehensive Income Commissions and other portfolio transaction costs. Gains and losses arising from changes in the fair value of the investments are included in the Statement of Comprehensive Income for the period in which they arise. (b) Fair Value Measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Investments, including exchange traded funds ( ETFs ), listed on a public securities exchange or traded on an over-the-counter market are valued on the basis of the last traded market price where this price falls within the quoted bid-ask spread for the investment. In circumstances where the last traded price is not within the bid-ask spread, the Manager determines the point within the bid-ask spread that is most representative of fair value based on the specific facts and circumstances. Unlisted or non-exchange traded investments, or investments where a last sale or close price is unavailable or investments for which market quotations are, in Counsel s opinion, inaccurate, unreliable, or not reflective of all available material information, are valued at their fair value as determined by the Manager using appropriate and accepted industry valuation techniques including valuation models. The fair value determined using valuation models requires the use of inputs and assumptions based on observable market data including volatility and other applicable rates or prices. In limited circumstances, the fair value may be determined using valuation techniques that are not supported by observable market data. The cost of investments is determined on a weighted average cost basis. Cash and cash equivalents which includes cash on deposit with financial institutions and short term investments that are readily convertible to cash, are subject to an insignificant risk of changes in value, and are used by the Fund in the management of short-term commitments. Cash and cash equivalents are reported at fair value which closely approximates their amortized cost due to their nature of being highly liquid and having short terms to maturity. The Fund may use derivatives (such as written options, futures, forward contracts, swaps or customized derivatives) to hedge against losses caused by changes in securities prices, interest rates or exchange rates. The Fund may also use derivatives for non-hedging purposes in order to invest indirectly in securities or financial markets, to gain exposure to other currencies, to seek to generate additional income, and/ or for any other purpose considered appropriate by the Manager, provided that the use of the derivative is consistent with the Fund s investment objectives. Any use of derivatives will comply with Canadian mutual fund laws, subject to the regulatory exemptions granted to the Fund, as applicable. Valuations of derivative instruments are carried out daily, using normal exchange reporting sources for exchange-traded derivatives and specific broker enquiry for over-the-counter derivatives. The value of forward contracts is the gain or loss that would be realized if, on the valuation date, the positions were to be closed out. The change in value of forward contracts is included in the Statements of Comprehensive Income Other changes in fair value of investments Net unrealized gain (loss). Further information on the Fund s fair value measurements may be found in Note 10. (c) Income recognition Interest income from interest bearing investments is recognized using the effective interest method. Dividends are accrued as of the ex-dividend date. Realized gains or losses on the sale of investments, including foreign exchange gains or losses on such investments, are calculated on an average cost basis. Income, realized gains (losses) and unrealized gains (losses) are allocated daily among the series on a pro-rata basis. (d) Commissions and other portfolio transaction costs Commissions and other portfolio transaction costs are costs incurred to acquire financial assets or liabilities. They include fees and commissions paid to agents, advisers, brokers and dealers. (e) Securities lending, repurchase and reverse repurchase transactions (f) The Fund is permitted to enter into securities lending, repurchase and reverse repurchase transactions as set out in the Fund s Simplified Prospectus. These transactions involve the temporary exchange of securities for collateral with a commitment to redeliver the same securities on a future date. Securities lending transactions are administered by the Canadian Imperial Bank of Commerce (the Securities Lending Agent ). The value of cash or securities held as collateral must be at least 102% of the fair value of the securities loaned, sold or purchased. Collateral received is comprised of debt obligations of the Government of Canada and other countries, Canadian provincial and municipal governments, and financial institutions. Income is earned from these transactions in the form of fees paid by the counterparty and, in certain circumstances, interest paid on cash or securities held as collateral. Income earned from these transactions is included in the Statements of Comprehensive Income -Securities lending income and recognized when earned. Foreign currency The functional and presentation currency of the Fund is Canadian dollars. Foreign currency purchases and sales of investments and foreign currency dividend and interest income and expenses are translated to Canadian dollars at the rate of exchange prevailing at the time of the transactions. Foreign exchange gains (losses) on purchases and sales of foreign currencies are included in the Statements of Comprehensive Income - Net realized gain (loss). The fair value of investments and other assets and liabilities, denominated in foreign currencies, are translated to Canadian dollars at the rate of exchange prevailing on each business day.

9 NOTES TO INTERIM FINANCIAL STATEMENTS 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (g) Offsetting The Fund only offsets financial assets and liabilities in the Statement of Financial Position when there is a legally enforceable right to set-off the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. In the normal course of business, the Fund enters into various master netting agreements or similar agreements that do not meet the criteria for offsetting in the Statements of Financial Position but still allow for the related amounts to be set off in certain circumstances, such as bankruptcy or termination of the contracts. Income and expenses are not offset in the statement of comprehensive income unless required or permitted to by an accounting standard, as specifically disclosed in the IFRS policies of the Fund. (h) Net assets attributable to securityholders per security (i) (j) Net assets attributable to securityholders per security is computed by dividing the net assets attributable to securityholders of a series of securities on a business day by the total number of securities of the series outstanding on that day. Net asset value per security Net asset value per security is determined for the purchase and redemption of securities in accordance with the methods disclosed in the Fund s Simplified Prospectus and Annual Information Form. These methods may vary from valuation principles under IFRS. As at September 30, 2017 and March 31, 2017, there were no such differences. Increase (decrease) in net assets attributable to securityholders from operations per security Increase (decrease) in net assets attributable to securityholders from operations per security in the Statements of Comprehensive Income represents the increase (decrease) in net assets attributable to securityholders from operations for the period, divided by the weighted average number of securities outstanding during the period. (k) Comparative figures Certain prior period comparative amounts have been restated to conform to the current period s presentation. 4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS The preparation of these financial statements requires management to make estimates and assumptions that primarily affect the valuation of investments. Estimates and assumptions are reviewed on an ongoing basis. Actual results may differ from these estimates. Use of Estimates Fair value of securities not quoted in an active market The Fund holds financial instruments that are not quoted in active markets and are valued using valuation techniques that make use of observable data, to the extent practicable. Various valuation techniques are utilized, depending on a number of factors, including comparison with similar instruments for which observable market prices exist and recent arm s length market transactions. Key inputs and assumptions used are company specific and may include estimated discount rates and expected price volatilities. Changes in key inputs, could affect the reported fair value of these financial instruments held by the Fund. Use of Judgments Classification and measurement of investments and application of the fair value option In classifying and measuring financial instruments held by the Fund, the Manager is required to make significant judgments in order to determine the most appropriate classification in accordance with IFRS 9. The Manager has considered the Fund s business model, commitments to securityholders, and the manner in which investments are managed and evaluated as a group and has determined that irrevocable designation of financial instruments as financial assets or financial liabilities at fair value through profit or loss provides the most appropriate measurement and presentation of the Fund s investments and financial instruments. Functional currency The Fund s functional and presentation currency is the Canadian dollar, which is the currency considered to best represent the economic effects of the Fund s underlying transactions, events and conditions taking into consideration the manner in which securities are issued and redeemed and how returns and performance by the Fund are measured. 5. INCOME TAXES The Fund is as a unit trust under the provisions of the Income Tax Act (Canada) and, accordingly, is subject to tax on its income including net realized capital gains in the taxation year, which is not paid or payable to its securityholders as at the end of the taxation year. It is the intention of the Fund to distribute all of its net income and sufficient net realized capital gains so that the Fund will not be subject to income taxes other than foreign withholding taxes, if applicable. Losses of the Fund cannot be allocated to investors and are retained in the Fund for use in future years. Non-capital losses may be carried forward up to 20 years to reduce taxable income and realized capital gains of future years. Capital losses may be carried forward indefinitely to reduce future realized capital gains. Refer to Note 9 for the Fund s loss carryforwards. 6. MANAGEMENT FEES AND OPERATING EXPENSES No management fee or operating expenses, other than certain specific fund costs, are charged to the Fund Such costs include taxes (including, but not limited to GST/HST and income tax), interest and borrowing costs, all fees and expenses of the Counsel Funds Independent Review Committee, fees paid to external service providers associated with tax reclaims, refunds or the preparation of foreign tax reports on behalf of the Funds, any new fees related to external services that were not commonly charged in the Canadian mutual fund industry and introduced after October 27, 2017 and the costs of complying with any new regulatory requirements, including, without limitation, any new fees introduced after October 27, FUND S CAPITAL The capital of the Fund is divided into different series with each series having an unlimited number of securities. The securities outstanding for the Fund as at September 30, 2017 and March 31, 2017 and securities issued, reinvested and redeemed for the period are presented in the Statements of Changes in Financial Position. Counsel manages the capital of the Fund in accordance with the investment objectives and strategies as discussed in Note 10.

10 NOTES TO INTERIM FINANCIAL STATEMENTS 8. FINANCIAL INSTRUMENTS RISK (a) Risk exposure and management The Fund s investment activities expose it to a variety of financial risks, as defined in IFRS 7 Financial Instruments: Disclosures ( IFRS 7 ). The Fund s exposure to financial risks is concentrated in its investments, which are presented in the Schedule of Investments, grouped by asset type, with geographic and sector information. The Manager seeks to minimize potential adverse effects of financial risks on the Fund s performance by employing professional, experienced portfolio advisors, by monitoring the Fund s positions and market events daily, by diversifying the investment portfolio within the constraints of the Fund s investment objectives and strategies (as disclosed in Note 10), and where applicable, by using derivatives to hedge certain risk exposures. To assist in managing risks, the Manger also maintains a governance structure that oversees the Fund s investment activities and monitors compliance with the Fund s stated investment strategy, internal guidelines, and securities regulations. (b) Liquidity risk Liquidity risk arises when the Fund encounters difficulty in meeting its financial obligations as they come due. The Fund is exposed to liquidity risk due to potential daily cash redemptions of redeemable securities. In accordance with securities regulations, the Fund must maintain at least 85% of its assets in liquid investments (i.e., investments that can be readily sold). In addition, the Fund retains sufficient cash and short-term investment positions to maintain adequate liquidity. The Fund also has the ability to borrow up to 5% of its net assets for the purposes of funding redemptions. Other investment funds managed by Counsel ( Top Funds ) may invest in Series O securities offered by the Fund on a prospectus-exempt basis in accordance with the investment objectives of those funds. From time to time, these holdings may be rebalanced by either reducing an allocation to the Fund or eliminating such investments in the Fund entirely. In either case, depending on the size of the investment by a large investor, this could cause a significant redemption from the Fund. Meeting such a redemption may require the Fund to sell portfolio holdings. This could result in the Fund selling a particular holding before it has achieved the valuation sought by the Manager thus affecting Fund returns. This could also result in the Fund realizing capital gains on its holdings earlier than planned, which could result in capital gains distributed to investors in the Fund (which could result in income tax payable by the investor) that might not have occurred or might have occurred at a later date. For the amounts held by and the changes thereto during, please refer to the amounts disclosed pertaining to Series O in the Statement of Financial Position and Statement of Changes in Financial Position. (c) Credit Risk Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Fund. All transactions in listed securities are executed with approved brokers. To minimize the possibility of settlement default, securities are exchanged for payment simultaneously, where market practices permit, through the facilities of a central depository and/or clearing agency where customary. The carrying amount of investments and other assets represents the maximum credit risk exposure as at the dates of the Statements of Financial Position. The Fund may enter into securities lending transactions with counterparties and it may also be exposed to credit risk from the counterparties to the derivative instruments it may use. Credit risk associated with these transactions is considered minimal as all counterparties have an approved credit rating equivalent to a Standard & Poor s credit rating of not less than A-1 (low) on their short-term debt and of A on their long-term debt, as applicable. If significant, Note 10 summarizes the Fund s exposure to credit risk pertaining to fixed income investments and derivatives. (d) Currency risk Currency risk arises when the fair value of financial instruments that are denominated in a currency other than the Canadian dollar, which is the Fund s reporting currency, fluctuates due to changes in exchange rates. If applicable and significant, Note 10 summarizes the Fund s exposure to currency risk. (e) Interest rate risk (f) Interest rate risk arises when the fair value of interest-bearing financial instruments fluctuates due to changes in the prevailing levels of market interest rates. Cash and cash equivalents do not expose the Fund to significant amounts of interest rate risk. If applicable and significant, Note 10 summarizes the Fund s exposure to interest rate risk related to fixed income investments. Other price risk Other price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer, or all factors affecting all instruments traded in a market or market segment. All investments present a risk of loss of capital. This risk is managed through a careful selection of investments and other financial instruments within the parameters of the investment strategy. If applicable and significant, Note 10 summarizes the Fund s exposure to other price risk, including indirect exposure through underlying mutual funds and ETFs. 9. FURTHER INFORMATION A copy of the Fund s current Simplified Prospectus, Annual Information Form, Management Report of Fund Performance, Fund Fact Sheets, quarterly portfolio disclosures and proxy voting policies and disclosures will be provided, without charge, by: calling toll-free , writing to Counsel Portfolio Services Inc., 5015 Spectrum Way, Suite 300, Mississauga, ON, L4W 0E4, by visiting our website at or by visiting

11 NOTES TO INTERIM FINANCIAL STATEMENTS All figures stated in $000s of Canadian dollars unless otherwise noted 10. FUND SPECIFIC INFORMATION (a) Series information Date of Minimum Management Administration Series Inception Investment ($) Fee (%) Fee (%) Series O 1,3 January 7, Series R 2,3 January 7, There are no management or administration fees for this series since these securities are designed to facilitate fund-of-fund investing where duplication of management fees is prohibited. 2 This series is not available for sale and is held solely by Counsel. 3 Securities of this series are not subject to sales charges or redemption charges. (b) Investment Objectives and Strategies The Fund seeks to achieve a steady flow of income by investing, either directly or indirectly through other investment funds, primarily in a diversified portfolio of Canadian government and corporate fixed-income securities. Preservation of capital is an important factor in the selection of investments. The Fund may invest up to 30% of its assets in foreign securities. The Fund is not available to retail investors and is only available to other institutional investors (primarily other Counsel Funds). (c) Risks Associated with Financial Instruments i. Currency Risk ii. As at September 30, 2017 and March 31, 2017, the Fund did not have a significant exposure to currency risk. Interest Rate Risk The table below summarizes the Fund s exposure to interest rate risks by remaining term to maturity. Bonds Less than 1 year 1-5 years 5-10 years > 10 years Total September 30, ,067 18,157 8,454 42,039 March 31, ,294 6,156 11,505 30,056 iii. iv. As at September 30, 2017, had prevailing interest rates raised or lowered by 1.0%, assuming a parallel shift in the yield curve, with all other variables held constant, net assets would have decreased or increased by approximately $3,192 or 7.5% of total net assets (March 31, 2017 $2,128 or 6.4% of total net assets). The Fund s sensitivity to interest rate changes was estimated using the weighted average duration of the bond portfolio and interest rate swaps. In practice, the actual trading results may differ and the difference could be material. Other Price Risk As at September 30, 2017 and March 31, 2017, the Fund did not have a significant exposure to other price risk. Credit Risk The Fund s greatest concentration of credit risk is in debt securities, such as bonds. The fair value of debt securities includes consideration of the creditworthiness of the debt issuer. As at September 30, 2017, the maximum exposure to any one debt issuer was 21.1% of the net assets (March 31, %). The table below indicates the Fund s exposure to debt securities by credit rating as a percentage of net assets: September 30, 2017 AAA 22.8 AA 38.4 A 21.2 BBB 15.9 Total 98.3 March 31, 2017 AAA 16.1 AA 38.6 A 28.4 BBB 14.9 Unrated 0.1 Total 98.1 Credit ratings are based on DBRS, Standard & Poor s or Moody s ratings. (d) Loss Carryforwards As at the last taxation year-end, the Fund had no loss carryforwards available to offset future taxable income.

12 NOTES TO INTERIM FINANCIAL STATEMENTS All figures stated in $000s of Canadian dollars unless otherwise noted 10. FUND SPECIFIC INFORMATION (continued) (e) Fair Value Classification The table below summarizes the Fund s financial instruments carried at fair value using the following fair value hierarchy: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and Level 3 Inputs that are not based on observable market data. as at September 30, 2017 Level 1 Level 2 Level 3 Total Fixed income - 42,039-42,039 Mutual Funds Equities Cash equivalents Derivative assets Derivative liabilities - (29) - (29) Total 13 42,019-42,032 as at March 31, 2017 Level 1 Level 2 Level 3 Total Fixed income - 32,376-32,376 Mutual Funds Equities Cash equivalents - 1,852-1,852 Derivative assets Derivative liabilities - (1) - (1) Total 1 34,236-34,237 There were no significant transfers between Level 1 and Level 2. (f) Securities Lending Value of Value of securities collateral as at loaned received September 30, March 31, ,457 1,531 A reconciliation of the gross amount generated from the securities lending transactions to the security lending income to the Fund for the periods ended March 31, 2017 and 2016 is presented below: Amount ($) Percentage of Total Amount (%) for the six-month period ended September Gross Securities Lending Income Securities Lending Agent fees Securities Lending Income to the Fund before Withholdings Taxes Withholding Taxes Securities Lending Income Client Services 180 Queen St. W., Toronto, ON M5V 3K1 Toll-Free: Fax: (416) Sales & Marketing 5015 Spectrum Way, Suite 300, Mississauga ON L4W 0E4 Toll-Free: Fax: